Bridging Loans

Bridging loans in the UK from Magni Finance’s contacts in the bridging market are second to none. We work with specialist lenders, peer-to-peer lenders, private banks and family office contacts so there is no case that is too difficult for us to deal with and no deal that is too big.

With years of experience and access to the most competitive rates, with Magni Finance, clients will be provided with a premium service. Whether a bridging loan is required for a refurbishment or to purchase another property, all cases are considered with us.

To find out more about how we can help you get the bridging loan you need, get in touch with our team.

A bridging loan is typically used to quickly purchase a new property. Traditional mortgages can take weeks to be approved, whereas bridging loans can be agreed upon in as little as 24 hours. The bridging loan will then be secured against a property or multiple properties.

For example, if a family are looking to upsize from a £500,000 property to a £1,000,000 property, they may seek a bridging loan as a short term solution.

A bridging loan can be used to purchase their new property, whilst waiting for a buyer for their current property. Once the property is sold, they can clear the bridging loan. If there is a shortfall, the new property can be refinanced to repay the remaining bridging loan at a more favourable rate.

Unlike a traditional mortgage, securing a bridging loan is not necessarily dependent on a client’s income. Instead, lenders will need to know how the loan will be repaid, which is also commonly known as the ‘exit strategy.’

Examples of exit strategies include selling property and other assets or refinancing onto a cheaper, more conventional mortgage.

Arranging bridging finance can be complicated and extremely costly if you get it wrong. Having a broker like Magni Finance will ensure you get the right outcome with minimal hassle.

There are several types of bridging loans available in the UK for homeowners. Which is most suitable for a client will depend on their personal and financial goals. Choosing the correct type of bridging loan is imperative. Below, find some of the different bridging options available.

Closed Bridging Loan – taken out by clients once they have a fixed repayment date. This means the client has a clear exit strategy, such as selling a property. This type of bridging loan is most popular because it provides lenders with more certainty about loan repayment.

Open Bridging Loan – agreed upon by both parties with no fixed repayment date. This type of bridging loan tends to be used in scenarios where a client needs to raise funds for a specific purpose yet is unsure how and when they can repay.

First Charge Bridging Loan – secured against a property where the lender has the first legal charge. In other terms, if a first charge bridging loan has defaulted then the lender will be the first to receive any money made from a sale.

Second Charge Bridging Loan – work similarly to a first charge bridging loan. However, they come with higher interest rates because they are considered ‘higher risk’. If a borrower defaults on a second charge bridging loan, then the first charge lender will have the rights to the first sale proceeds and the second charge will have legal access to the following.

Fixed or Variable Bridging Loans – can either have a fixed or variable rate similar to a traditional mortgage. Fixed bridging loan rates may be more suitable if a client prefers stability with payments. On the other hand, variable interest rates may be more cost-effective long-term for some clients. The interest rate will vary dependent on the Bank of England’s base rate; therefore, variable rates may not be suitable for all clients.

We guide clients in choosing the most appropriate type of bridging loan based on their financial circumstances. However, unlike direct lenders, we use a holistic approach when finding the best bridging loans. Therefore, unconventional circumstances are considered.

A bridging loan is a type of short-term loan that can help essentially “bridge” the gap between the purchase of a new property and the sale of a current one. Bridging loans are used for a variety of circumstances.

Often, people use bridging loans to access funds quickly to complete property purchases. Conversely, bridging loans are a viable option when clients need to raise money for refurbishment purposes. In short, bridging loans are popular in many scenarios because they are flexible and can help clients access money when and as they need it quickly.

Bridging loans are often used for, but not exhaustive to, the following scenarios:

Property Development: Bridging loans are commonly used by property developers doing conversions, extensions and refurbishments.

Business Purposes: Short-term funding for business purposes is also possible through bridging loans. For instance, to help with cash-flow gaps or to finance a new project quickly.

Property Investment: Bridging loans are frequently used to purchase investment properties, such as buy-to-let properties.

For clients that would like to access bridging loans, contact Magni Finance. Our team of experts can help regarding your specific situation and whether a bridging loan is most appropriate.

How much someone can borrow with a bridging loan will depend on the lender in question, their finances, the loan-to-value (LTV) ratio as well as where it is located.

This will also depend on other specific factors. For example, what type of property they would like to purchase, what property the bridging loan will be secured against, whether any works are required and when they will repay the loan.

It is important to speak to a financial advisor or bridging loan expert before applying. Bridging loans come with high-interest rates, and other types of finance solutions may be more suitable in certain circumstances.

How much a bridging loan costs will depend upon the amount borrowed, the period of the loan term, interest rates alongside any arrangement fees or additional charges.

For example, the LTV ratio will either drive monthly interest rates up or down. The higher the equity a client has in a property, the more likely the lender will charge lower interest rates. In a similar manner, the type of legal charge the client chooses will impact the cost of the bridging loan. First charges tend to be the least risky, resulting in lower monthly interest rates.

Moreover, the type of property the client uses as security will affect the overall cost. The location and condition of the security property will also impact the bridging loan costs, with certain areas being more favourable, such as London.

Nonetheless, there are other factors which might influence how much a bridging loan could cost a client through bridging lenders:

Exit Fees: An exit fee simply means the borrower will have to pay a certain amount if and when they repay the bridging loan. Exit fees are not the same as Early Repayment Charges (ERCs) and can cost between 1 – 2%. You should always check the terms of any ERCs with your lender.

Facility Fee: Also known as a Lenders’ Arrangement Fee or Lenders’ Facility Fee, a facility fee varies between 1-2% of the overall bridging loan with most standard lenders.

Default Interest Rates: Lenders frequently have a default interest rate which is also referred to as a concessionary rate. This simply means if a payment is missed or late, or any other terms agreed between the client and lender are not adhered to, then a higher interest rate will apply. For instance, 2% per month may be the standard rate but an additional 1% could be added if any terms are not adhered to.

Interest Roll-Up: Typically, a bridging loan will have an interest roll-up arrangement which allows clients to pay all of the interest at the end of the term. This can prove cost-effective for some clients. However, some lenders may require interest to be serviced on a monthly basis.

Legal Fees: Similarly to a mortgage, a bridging loan will require a client to arrange their own solicitor as well as pay for the lenders.

Valuation Fees: Most lenders will charge a valuation fee which is based on the value of the property. The higher the value, the higher the cost.

Bridging loans are accessible via direct lenders or specialised brokers like Magni Finance.

After getting in contact, clients will then have an initial consultation arranged with us. During the consultation, we will discuss their financial circumstances; this serves as an opportunity for both parties to understand the goals of the bridging loan, and what type is best.

Following this, we will find the best lender in our network for the client in question. We work with a variety of banks, specialist lenders and family offices that can offer competitive rates for bridging loans in the UK.

Using Magni Finance for bridging loans is secure, fast and efficient. Moreover, are specialists at arranging large bridging loans on residential properties. To get a bridging loan today quickly and efficiently, contact Magni Finance.